The E-Mini futures have been advancing higher in the pre-session and we are now approaching the crucial inflection point I have been highlighting for the past few sessions. It’s probably no exaggeration to say that what happens today will most likely affect the remainder of this month going all the way into the presidential elections.
Navigating this week is going to take some finesse as the market is giving us more conflicting signals than a teenage girl on her first date. First up the main key to survival and – better yet – prospering in high volatility market environments is to not attempting to find order where there is chaos, to not fill in a gaping chasm of confusion with your own personal opinion. If you have the mental discipline to do that then – congrats, you’re already way ahead of over 90% of all market participants.
Things are not looking so hot for equities at the moment. In my Wednesday post I highlighted the notion that the strength of any bounce that would eventually materialize serves as a litmus test for what the fall season most likely has in store for us. Given the fact that two consecutive rally attempts did not exceed the 100 handle mark and were met by instant reversals does not bode well for the remainder of the month and going into September.
The weekend fears of a many retail bag holders turned into reality yesterday when last Friday’s sell off was amplified by continuation at the tail end of a lackluster low participation session. The main thought circling around in everyone’s inflamed amygdala right now is whether or not we have reached selling exhaustion or if there will be more follow through in the days and perhaps weeks to come. The short answer to that is – yes, and no.
With Labor Day behind us we are now officially heading into the most turbulent period of the year. With 2020 being an election year that would apply politically as well as when it comes to participating in the financial markets. At least in the latter department – not a moment too soon. The big summer lull is by far my least favorite season and I’m looking forward to a bit more action and volatility – both realized and implied.
Well that didn’t take very long now, did it? Just two days ago I was bemused by a market seemingly running on cruise control and pushing up vertically during what is historically considered a bearish week. Of course the ensuing correction yesterday looks rather obvious in hindsight to the uninitiated, but let me assure you that I have seen raging rallies like these extend far beyond anyone’s imagination on numerous occasion in my time. In other words, if you somehow managed to pin the top then strike it up to good luck and keep your ego in check.
Equities continue to power higher with no apparent end in sight whilst ignoring all seasonal bias. This does not come as a huge surprise as we are in the midst of a powerful low volatility bull cycle that is partially fueled by the systematic inflation of the U.S. Dollar – long term consequences be damned. Cash may have used to be king but not now it’s everyone’s least favorite step child.
Along with April and May the months of September and October are actually my most favorite of the entire year. The heat finally breaks, the nights are getting cooler, and most importantly the tourist zombie armies have finally returned to their respective icy enclaves in the North. Prices across the board are dropping as well, so it’s a perfect time to plan a late summer or early fall vacation. Life is good – until November when I get to complain about too much rain and cold feet again.
This is going to be a brief post as we are running low on technical context that would provide any meaningful edge to our respective trading activities. The market has been going up – it continues to go up – and it’ll go up until that famous last sucker finally has been found. Based on historical statistics (see my Monday post) and the ongoing trend we knew this week would most likely end in the plus but few of us expected the ferocity of buying pressure we’ve witnessed all week.
As equities remain on cruise control and there’s really not much new to report on the daily front I decided to take a peek at some of my longer term momentum charts. The ones that stood out all relate to market breadth, which refers to the ratio between advancing stocks vs. declining stocks. But why would we care about that?